Cemco Holdings v National Life Insurance 2.

Is Cemco’s purchase of UCC shares subject to the tender offer

(G.R. No. 171815, 7 August 2007) requirement, and does the rule on mandatory tender offer also
apply to shares that were indirectly acquired?
Petitioner(s): Cemco Holdings, Inc.
Respondent(s): National Life Insurance Company of the Philippines, Inc.
OPINION(S) OF THE COURT and RULING
ANTECEDENT FACTS R.A. No. 8799 grants authority to SEC to regulate, investigate, or
supervise the activities of persons to ensure compliance with the
Union Cement Corporation (UCC) has 2 principal stockholders: UCHC
Securities Regulation Code. The purpose thereof is to protect investors
(60.51%) and Cemco (17.03%). Majority of UCHC’s stocks are owned by
and to minimize fraudulent and manipulative devises.
BCI (21.31%) and ACC (29.69%). Cemco owned 9% of UCHC stocks.
The power conferred upon SEC to promulgate rules and regulations is a
BCI informed PSEi that it and its subsidiary ACC had passed resolutions
legislative recognition and the impossibility of foreseeing all the possible
to sell to Cemco BCI’s stocks in UCHC equivalent to 21.31% and ACC’s
contingencies that cannot be addressed in advance.
stocks in UCHC equivalent to 29.69%.
The mandatory tender offer is still applicable even if the acquisition is less
Cemco’s beneficial ownership in UCC increased by 36%, amounting to
than the 35% threshold, when the purchase would result in ownership of
53% of all shares of UCC.
over 51% of the total outstanding equity securities of the company.
PSEi inquired to SEC as to whether the Tender Offer Rule is applicable to
Cemco’s purchase of the majority shares of UCC.
DOCTRINES, CONCEPTS and LAWS
Respondent National Life Insurance Company (NLIC), a minority
R.A. No. 8799 (The Securities Regulation Code)
shareholder of UCC, sent a letter to Cemco demanding the latter to
comply with the rule of mandatory tender offer. Cemco refused. o Section 19: Tender Offer
o Bid by a third-party to acquire a substantial percentage of
o NLIC filed a complaint with SEC asking to reverse the Resolution
a company’s stock, generally at a price above market
declaring the finality of the Cemco’s purchase
price, for the purpose of taking over the company
o SEC ruled in favor of NLIC, and Court of Appeals (CA) similarly
o If shareholding exceeds the 35% threshold, the law
affirmed this decision
makes it mandatory for the acquiring person to offer to
Cemco contends that R.A. No. 8799, Section 19 does not vest SEC with buy the shares of the other shareholders
jurisdiction to adjudicate and determine rights and obligation of the parties o Gives minority shareholders the chance to exit a public
since, under the same statute, SEC is not authorized to issue orders company by selling their shares at the same price as
granting affirmative reliefs. those of the majority or controlling shareholders in case
they are not comfortable with the new group of
shareholders
ISSUE(S)
o Gives authority to SEC to impose administrative sanctions (i.e.
1. Does SEC have jurisdiction to adjudicate the dispute between the imposition of fines, suspension or revocation of registration, etc.)
parties involved, or to render judgment requiring Cemco to make
a tender offer for the UCC shares in question?
Reviewer by Alecs Laohoo